Author: Rubens Penha Cysne

Source: Conjuntura Econômica - RJ, 10/07/2009

Macroeconomics, like other areas of specialization in economics, and just as other sciences also do, borrows from several other branches of knowledge the foundations on which its models and conclusions derive.

Interestingly, however, the value added by its sister science to undergraduate courses, administration, is found, at most, in often homeopathic doses in its normative analyzes.

The normative macro economy is usually prolific in the design of the finish lines, with the opening ribbon (to be broken by the first arrival) and flags of various colors (in general, with a slight predominance of black). But he hardly gives precise instructions on how to run the marathon. Clear examples in this regard are found in the perennial line-of-arrival proposals of the type "you have to reduce the public deficit" or, "you need to increase the social return of public spending".

Achieving such goals requires loans primarily from political economy (or political science), but this is not the main theme of this article. We aim here only to exemplify how loans from normative macroeconomic analysis to management can also be useful in the effective achievement of objectives such as the two repeated above.

Optimization

Economics has always been able to quickly acquire advances in mathematics and probability theory. First-year students of postgraduate courses in economics are quickly faced with dynamic optimization problems.

They need to find time functions as optimization process solutions on the part of consumers willing to optimize the discounted value of their happiness. Much of these problems are solved using the calculation of variations, a technique developed by mathematicians born in the 1813th century: the Swiss Leonhard Euler and the (naturalized) Frenchman Joseph Lagrange (who died in XNUMX).

Another part of these problems is more easily solved by appealing to the theory of optimal control, which was developed in the 50th century (60s and XNUMXs) by Russian mathematicians, Lev Pontryagin in particular.

When optimal planning incorporates the usual uncertainties of everyday life, it moves from solutions in function spaces to solutions that are families of probability distributions. Especially when taking the defined time in discrete intervals, another technique is used there, dynamic programming, also developed by a mathematician (Richard Bellman, American, in the 1950s).

The same type of lateral assimilation is not observed, however, on the part of economics, with respect to the science of management. Let us exemplify, in the field of public finances, with the budget preparation and execution process. More specifically, let us take the case, in Brazil, of a first economist who wants to see the public deficit reduced; a second economist who proclaims, in his prescription, a greater return on spending on education; and, finally, a third party who advocates the provision of greater street safety.

Such a finish line prescription is generally of little use if it is not accompanied by instructions on how to run the marathon, that is, on how to obtain such types of results in practice.

It would be tantamount to an orthopedist to assist a run over and say that the bones should be replaced.

Suggestions

In the political and procedural context on which the federal budget institution is currently based, the liberal economist who wants to reduce the deficit would probably be contemplated only with the suggestion of increasing contributions. These, despite generating large caliber distortions, are preferable by the federal sphere to taxes because they do not generate compulsory distribution with other spheres (such as the IPI and income tax, for example).

Of suggestions for cutting expenses, such an economist would probably not hear when presenting his income to those who effectively manage the country's political economy. Likewise, the second economist, eager to increase the return on education spending, would at best be led to the Court of Auditors' case file.

With any luck, he would be able to deal with administrative irregularities related to spending in this area. But not about how much society would have benefited in return for paying taxes directed at education.

Finally, the economist wishing to improve public security at best would be offered a package of budgetary links, a control variable that tends to have very little correlation with the primary objectives that generate it.

Bindings in general can only compel the public administrator to spend more where it is not necessary and to spend less where it is (or would have been) necessary. It usually represents the opposite of the rule of spending less to get more. Of course, such issues cannot be resolved with administrative panaceas.

It is necessary firsthand to resort to political economics to design a system of democratic representation that effectively allows for the effective handling of such issues. Then, specify a budget institution that manages the right incentives and controls for doing so. But this does not mean that some of the methodologies that administrative science is dealing with cannot help.

Let us borrow, by way of example only, some of the teachings contained in an article published in January 1992 by Robert S. Kaplan and David P. Norton in the Harvard Business Review. Entitled “The Balanced Scorecard: Measures That Drive Performance”, the content of the article could be well summarized in its first sentence: “What you measure is what you get”.

Balancing

Kaplan and Norton's theory (or conjecture) is that a firm's management should be based on balanced information, including not only financial return, as often occurs, but also internal processes, the customer's view and the innovation process long term. In the application of such ideas to the public sector, reelection takes the place of financial return (since both portray survival) and the customer's view is replaced by the vision of society as a whole (in particular, those who are entitled to vote) ).

More important than balancing the information is the fact that each of the four views above has, along with the goals set, a set of associated indicators. This is the crucial point to note when applying the Balanced Scorecard, in particular to the public sector. Currently, however, in the analysis of national public accounts, there is no set of well-defined and publicly known indicators, with perspectives defined from each of the four areas mentioned above, which allows the continuous assessment of the return on spending. Such a point eliminates the chances of a serious discussion on each of the points raised above, undermining the basis for achieving each prescription.

For example, much more efficient than allocating resources to a specific rubric, it would be to define the goals for that rubric from the point of view of the population, the internal government processes, the desired innovations and the political process. If the goals are achieved with fewer resources than the linked, why compel the public administrator to spend more than necessary, when other items (for example, basic sanitation) may be left unattended?

As an indicator of achievement of public objectives, the links are terrible indicators. This is because linking is an operational goal, not a final one. In some cases, the best of objectives can be achieved at the expense of disasters. Macroeconomists aware of such issues should look ahead and add to their respective recipes different perspectives (such as the four described above) and various indicators (preferably classified according to well-defined perspectives).

Over time, due to the demand generated by such analyzes, the chances of such statistics becoming available would increase, allowing for new unions from standardization to administrative methodization, more indicators and so on, generating a virtuous circle.

The starting point for this process can be given through the gradual modification of macroeconomics as a science geared not only to the generation of prescriptions and prognoses, but also to the practical description of how to obtain such results.

Otherwise, there is always the risk of ad nauseum repetitions ("interest rates must be lowered" etc.) that may fall into the void of the commonplace.